By Indika Sakalasooriya Right-wing United National Party (UNP) led government of President Maithripala Sirisena yesterday presented a revised budget, making the previous regime’s last budget, perceived a highly populist one targeting an impending presidential election, look extremely bad.
The highlights of the budget speech delivered by Finance Minister Ravi Karunanayake in Parliament yesterday included some enormously people-friendly proposals such as massive tax reductions on 13 identified goods, tax on super-rich through Super Gain Tax, cut of LP gas prices, Rs.10, 000 public sector salary hike, pension hike of Rs.1, 000, Rs.20, 000 allowance for expectant mothers, and many more.
When Minister Karunanayake began to spell out the giveaways, many eyebrows would have been raised as some of the tax cuts were drastic and t he revenues the government was estimated to lose were simply indigestive. For example the proposed tax reduction on sugar, which was among the 13 identified goods, would cost the government over Rs.5 billion in taxes.
If that was not enough of a shock, when Karunanayke presented revenue proposals to support the sack of goodies, many jaws would have dropped, as most of t he revenue proposals were of Robin Hood in nature—tax the rich and feed the poor— which was totally uncharacteristic of a right-wing party like UNP that favours neoliberal ideals.
It appeared that the influence of left-leaning President Maithripala Sirisena and the parties within the coalition government, such as Jathika Hela Urumaya, had played a crucial role on the revised budget.The budget also contained some protectionist features such as avoiding tax cuts on milk powder imports, despite Rs.61 percent reduction in retail prices. According to Karunanayake, they have not touched the tax on milk powder to “encourage domestic milk production.”
Meanwhile, many one-time taxes were proposed, to “share excess profits companies make with the people,” Minister Karunanayke said.One-time taxes were proposed on satellite TV companies, casinos, bars and taverns, telecommunication companies, and the government expects to gain an estimated revenue of Rs.58 billion through this measure. This includes Rs.50 billion Super Gain Tax imposed on companies that posted over Rs.2 billion profits for the financial year 2013/14.
The new government was also seen very eager to get businesses that have allegedly evaded taxes on dubious grounds, under the tax net. According to Karunanayake, some of the companies that are engaged in assembly of motor vehicles in the country have not paid due taxes in full to the government, citing various reasons.Despite all the innovative taxes, the total tax revenue projected by the interim budget presented yesterday was less than the previous regime’s budget (original). The revised budget’s total tax revenue stood at Rs.1, 337 billion from original’s Rs.1416 billion.
However, t he revised budget projects a budget deficit of 4.4 percent in 2015 against the original’s 4.6 percent target, cutting t he expenditure by Rs.89 billion.
This could very well be the most populist budget a government has ever presented in the country’s history. However, some of the revenue proposals are more than likely to have major implications on businesses in Sri Lanka, specially banking, finance and diversified sectors.
By Indika Sakalasooriya
